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my opinion there will be adequate jobs to take care of all the available workers.

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Mr. OUTLAND. That is a most enlightening statement.

The CHAIRMAN. May I say a word or two, Mr. Johnston, in order to reinforce your idea, or else stimulate further statements from you? Mr. JOHNSTON. I shall be glad to have you.

The CHAIRMAN. I think perhaps in preparing a plan there must be some Federal cooperation with the States and municipalities in order that we may have one comprehensive scheme when a policy is adopted.

From the standpoint of expenditures, this is necessary; otherwise it has always been my contention that except for such things as road building, the Army and Navy, and specified and enumerated authorities in the Constitution of the United States, there is no such thing as a Federal Government grant, that all of the money the Federal Government has it took from the people.

Mr. JOHNSTON. Right.

The CHAIRMAN. And if we go beyond the item of constitutional authority then the Federal Government goes into the State and takes a dollar from the State and takes out 25 cents for the establishment of some agency, gives them back 75 cents provided they match it, whereas they could keep the entire dollar and spend it as they pleased.

Mr. JOHNSTON. That is right.

The CHAIRMAN. And I think that the importance of applying that philosophy to the post-war program, continuing Federal expenditures well within proper Federal functions, is that it will stimulate proper planning by private industry and capital and by communities and States in carrying on their respective works.

I would just like to have some statement from you as to what extent you think it would be necessary after a policy has been adopted, from the fund of information we will get, for the Federal Government to cooperate with States, municipalities, and industry in the post-war future?

Mr. JOHNSTON. Mr. Chairman, I think your statement is thoroughly sound and thoroughly American. It is that philosophy which has built America into the greatest nation in the world and it is that philosophy which will build America into the greatest nation in the future.

Obviously the Federal Government is going to help. It has done so in the past in certain road construction programs, reclamation programs, and rivers and harbors programs.

I thing the dangerous practice is for the Federal Government to say, "We have so much money available, come and get it." Then the pressures are exerted to get a new pot of Federal money to build high schools, hospitals, gymnasiums, parks, and playgrounds-to federalize everything, to pyramid public works, and thereby pyramid bureaucracy and waste.

The CHAIRMAN. These activities you refer to are purely local

matters.

Mr. JOHNSTON. That is correct, but we know during the past few years many buildings such as courthouses, gymnasiums, and so forth have been erected with Federal money.

The CHAIRMAN. Was that not largely by reason of the lack of proper planning?

Mr. JOHNSTON. Of course, Mr. Chairman. That is the reason I am so complimentary about your statements. You cannot build a project without plans, and you cannot build a nation without a sound public policy.

Another question with respect to taxes which will interest, the gentleman from New York is the proposal to allow private concerns to hire architects and engineers to make blueprints and plans for postwar construction and deduct these expenses from gross income as part of their business expenses. Under the present laws such expenditures are considered capital expenditures and are taxed.

If, however, we could hire engineers and architects to draw plans today for work to be done after the war and deduct that as expense, you would find much more of it being done than is now being done. The Federal Government needs to plan and I am very happy you are doing that and also telling the States and municipalities that they need to plan.

The CHAIRMAN. That is our purpose. If you have one Federal agency presenting a plan which should be done by the State or municipality and having that directed by somebody from Washington, it is not always satisfactory. They need a Federal agency cooperating with them by letting them know what they can expect from the Federal Government and what they cannot expect.

Mr. JOHNSTON. You are perfectly correct.

Mr. McGREGOR. Would you suggest a change in the participation

now?

Mr. JOHNSTON. I hope that the Federal Government takes care of its projects and States and municipalities take care of theirs, with no contribution from the Federal Government.

The CHAIRMAN. Except those that are constitutionally provided for.

Mr. JOHNSTON. There are many things the Federal Government should do and they are legion and voluminous. There are many things the States and municipalities should do, and they are also legion and voluminous.

Mr. McGREGOR. You are favoring a program that the local people should really realize it is their money.

Mr. JOHNSTON. That is right.

Mr. CAFOZZOLI. Let us see if I can summarize your attitude.
Mr. JOHNSTON. All right, sir.

Mr. CAFOZZCLI. Speaking of lccal work, do you think any municipality that is able to take on this expense should do so?

Mr. JOHNSTON. That is right.

Mr. CAI OZZCLI. You have no objection to the Federal Government coming into the picture where a local situation must be met, and there are no local funds to do it with?

Mr. JOHNSTON. That can be done on projects properly within the functions of the Federal Government.

Mr. CAFOZZCLI. In such cases where you have, for example, slum clearance, they do not make for healthy citizens and the local government cannot help itself, would you have any objection to the Federal Government going in and assisting with Federal money to meet those

conditions?

Mr. JOHNSTON. In the first place, let me explain myself a little bit. I think one of our fundamental programs after the war is to

raise all classes of citizens to an American standard of decent life. I think we should definitely recognize that undertaking to raise living standards as the great frontier for tomorrow. If local governments cannot take care of the problem of rebuilding their blighted and slum areas then the State governments should step in before applying to the Federal Government for financing such local projects.

Mr. MCGREGOR. Prior to that private capital should be given an opportunity.

Mr. JOHNSTON. Yes, sir.

The CHAIRMAN. From the standpoint of stimulating the individual, could not the State through a loan on a long period of time help that individual to rehabilitate himself?

Mr. JOHNSTON. Yes; take my own State-Washington. We have a surplus of $35.000,000. There are poor housing areas in some of our larger cities. Why should the Federal Governinent help with that when the State government is well able to do so?

Mr. CAPOZZOLI. I agree with you. We have 48 States. Shall we advocate the same standards or shall we advocate decent housing for all? I am just wondering what the attitude of your organization is where the State and municipality cannot help, and where it is conceded we are not raising good citizens, should the Federal Government help? Mr. JOHNSTON. We should strive to provide a decent American standard of housing for all the American people. If, as you say, a State or a municipality absolutely cannot help itself to solve its problems, then the Federal Government should. I would stress the word "absolutely" in that connection. The difficulty is that it is too easy, as we know from past experience, for the States and municipalities to apply to the Federal Government when they can do it themselves. As I mentioned a few moments ago, I know a municipality which asked the Government to pay for its school system, although that particular municipality is in excellent financial condition, and the State is, too. That is a wrong attitude to encourage.

The CHAIRMAN. Does not the philosophy of this whole matter appear in our history and in the conditions of the pioneer people who founded this Government? When they went from one section to another and established towns and cities and built rude homes like log cabins, as my father and mother did, they built them themselves and it never occurred to them to ask the Federal Government for any financial assistance or any other kind of assistance.

In the words of Edwin Markham, "We are blind until we see that in the human plan nothing is worth the making if it does not make the man."

Mr. JOHNSTON. I can certainly motor down your highway of philosophy.

Mr. McGREGOR. I cannot help but insert that we do not have the New Deal philosophy in that.

Mr. ARNOLD. In your first statement you say the construction industry should eliminate its peaks and valleys. What do you mean by that? Mr. JOHNSTON. The construction industry can do more within itself to provide a greater continuity of employment than it has in the past. There is opportunity for use of the annual wage principle more widely, particularly in the field of maintenance and repair work. There are opportunities for management and labor to cut down costs of construction and hence to expand the market.

Mr. ARNOLD. I agree with you along that line. Would you make a recommendation to the Government that they try to cut down their expenses and try to fix the tax load so the small businessman would have a little left?

I read a statement in the paper by an economist saying the Govern ment could well subtract five billion.

The CHAIRMAN. In February of last year, I introduced a measure to have an office of fiscal investigations set up as an agency of the House of Representatives to follow up the appropriations, and also to see the necessity for other appropriations in order that we might eliminate extravagance and also see that the functions are being properly performed by various government agencies.

I reintroduced that in this Congress and in my judgment it would save the taxpayers untold millions of dollars.

Mr. JOHNSTON. Mr. Chairman, our organization has appeared before various committees of the Congress frequently, and we are always urging economy. I think you are very sound on that. Obviously in the excitement of war we do things we ordinarily would not do. We do not want to be destructively critical but constructively critical.

Mr. ARNOLD. I subscribe very thoroughly to your recommendations. I think it would not be a very bad idea for this committee to pass a resolution endorsing it.

Mr. JOHNSTON. Thank you.

Mr. McWILLIAMS. How would you get the construction industry together? It is the most disorganized and disjointed industry I know of.

Mr. JOHNSTON. I do not believe it is so disjointed. In southern California I know they have done an enormously good job of organizing themselves, and I believe that the construction industry in other sections and also nationally is very well organized.

There has been a tendency in recent years to believe individuals will not do anything of their own accord unless they are forced to by police efforts. In previous eras they were permitted to work themselves. We have got industry feeling that nobody can do anything unless there is the big stick of the Government to force them to do it. We have gotten a feeling we need a program of force, and industry has been just as responsible in this with the N. R. A. and other things which they thought would protect their own good, but we have got to get back to greater responsibility on the individual and the individual's organization, and I think if we ask the people to do those things they will.

Mr. McWILLIAMS. As soon as the war is over there is going to be a tremendous peak in the construction industry. There are a good many people, young people, who are married, and at present they double up with other families who are working in business, and say we have a ten-year plan, you are going to have a great peak in the building industry and you are going to have a falling off afterwards.

Mr. JOHNSTON. There is a great deal of truth in what you say and yet there are contributory factors which make for a longer period of this peak. In the first place, the costs will be high after the war and therefore they will postpone the least urgent construction needs.

Mr. McWILLIAMS. It was quite different in the last war. Everybody built at the high prices.

Mr. JOHNSTON. If you go on the theory that we cannot learn from experience, then I grant that the construction industry will have difficulty in providing more steady employment.

Mr. McWILLIAMS. That was another generation.

Mr. JOHNSTON. No. I was in the last war and I remember our experiences. I have four businesses and we do not plan to do all our construction work right after the war.

I was talking to the vice president of one of America's largest industries. They had $75,000,000 construction planned. He said: "We are not going to do it all right after the war, but over a period of the next 10 years.

There are a great many other people who have that same attitude. Mr. McWILLIAMS. You mentioned the construction industry having peaks and valleys. They just will not iron themselves out. Maybe you should have put in

Mr. JOHNSTON (interposing). There are contractors and mortgage lending institutions who can help in that. There are also means to measure the effective demand for construction which the industry can use to discourage speculative booms.

The CHAIRMAN. Like the various building and loan associations.

Mr. JOHNSTON. That is correct. The construction industry is not only contractors but includes financing institutions and manufacturers of building materials and equipment. You are not getting all the materials and equipment you are going to want right after this war. All of these things have a tendency toward lengthening out the so-called peak periods, provided the industry through its local and national organizations will use the market information which is available and will learn from experience, which I think it will do.

Mr. McGREGOR. I appreciate the frankness in your statement but I am just wondering this about what becomes of the little businessman who through patriotism has converted his plant from commercial to war industry.

What does your organization recommend that we can do, as Members of Congress, to help this man when the time arrives as of today, tomorrow, or the next day?

The CHAIRMAN. The reserve recommendation would be one way. Mr. JOHNSTON. Yes; and prompt payment upon cancelation of contracts is another method.

Mr. McGREGOR. But nevertheless you say payment on cancelation of contracts. They still have an obligation. They have purchased hundreds of thousands of tons of steel or obligated themselves for that steel. Have you any recommendation of what we can do to help that 400 or 500 or 600 men?

Mr. JOHNSTON. Yes; I very definitely do. I am a small businessman myself. In the first place, we should be allowed to build up

reserves.

Mr. McGREGOR. You mean to have him exempt from taxes for that particular period?

Mr. JOHNSTON. Yes; to accumulate funds now for reconversion after the war.

Mr. ARNOLD. Under the present tax laws he cannot do that.

Mr. JOHNSTON. No; he can not. The reserve cannot be built. Individually some allowance should be given him to compensate for the conversion program.

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